In the Washington Examiner, Timothy P. Carney spots Goldman Sachs calling for more financial regulation, which on the surface, is a seemingly paradoxical gesture:
Few writers today capture and explain the business-government dynamic as well as Ira Stoll, who blogs at “The Future of Capitalism.” Today, Stoll spotted this line in Goldman Sachs’ annual letter to shareholders:
Given that much of the financial contagion was fueled by uncertainty about counterparties’ balance sheets, we support measures that would require higher capital and liquidity levels.
Yes, that’s the largest investment bank on Wall Street calling for stricter regulation from Washington. Stoll has a pretty straightforward explanation:
What [Goldman CEO Lloyd] Blankfein and Mr. Cohn are now saying is that their desire for higher capital requirements isn’t related to concern about their ability to control Goldman‘s risk-taking (“Please, Mr. Government, supervise me more closely, allow me to borrow less money, and force me to take less risk”), but their ability to assess and judge the risks of their counterparties, the other firms they are doing deals with.
Why should Goldman have to pay for mitigating the risk of its deal-partners when the SEC or the Fed can do Goldman’s work for it — on the taxpayer dime?
This is further evidence of what I’ve been saying for months: just as tobacco regulation was a gift to Philip Morris, toy regulation was a gift to Mattel, and health-care “reform” was a gift to Big Pharma, financial reform will improve Goldman’s profitability, Obama’s populist rhetoric notwithstanding.
Exactly. In Liberal Fascism, Jonah Goldberg wrote (as quoted, and at times, annotated by fellow Bay Area blogger Bookworm Room):
Consider, for example, the largely bipartisan and entirely well-intentioned Americans with Disabilities Act, or ADA, celebrated everywhere as a triumph of “nice” government. The law mandated that businesses take a number of measures, large and small, to accommodate customers and employees with various handicaps. Offices had to be retrofitted to be wheelchair compliant. Various public signs had to be written in Braille. Devices to aid the hearing impaired had to be made available. And so on. [And on and on as enterprising customers, employees, students and lawyers providing an ever expanding and often quite imaginative list of what constitutes a “handicap.” They’re rational to do so, too. If there’s a trough, you’d be a fool not to feed at it. –Ed.]
Now imagine that you are the CEO of Coca-Cola. Your chief objection to this law is that it will cost you a lot of money, right? Well, not really. If you know that the CEO of Pepsi is going to have to make the same adjustments, there’s really no problem for you. All you have to do is add a penny — or really a fraction of a penny — to the cost of a can of Coke. Your customers will carry the freight, just as Pepsi’s customers will. The increase won’t cost you market share, because your price compared with the competitor’s has stayed pretty much the same. Your customers probably won’t even notice the price hike.
Now imagine that you own a small, regional soft drink company. You’ve worked tirelessly toward your dream of one day going eyeball-to-eyeball with Coke or Pepsi. Proportionally speaking, making your factories and offices handicapped-friendly will cost you vastly more money, not just in terms of infrastructure, but in terms of the bureaucratic legal compliance costs (Coke and Pepsi have enormous legal departments; you don’t). [And I have several lawyer friends who have made a good living providing ADA advice to innocuous small businesses that suddenly discovered that they needed to make a lawyer part of their budget so as not to run afoul of the feds. -Ed.] Plans to expand or innovate will have to be delayed because there’s no way you can pass on the costs to your customers. Or imagine you’re the owner of an even smaller firm hoping to make a play at your regional competitors. But you have 499 employees, and for the sake of argument, the ADA fully kicks in at 500 employees. If you hire just one more, you will fall under the ADA. In other words, hiring just one thirty-thousand-dollar-a-year employee will cost you millions.
The ADA surely has admirable intent and legitimate merits. But the very nature of such do-gooding legislation empowers large firms, entwines them with political elites, and serves as a barrier to entry for smaller firms. Indeed, the penalties and bureaucracy involved in even trying to fire someone can amount to guaranteed lifetime employment. Smaller firms can’t take the risk of being forced to provide a salary in perpetuity, while big companies understand that they’ve in effect become “too big to fail” because they are de facto arms of the state itself. (pp. 306-307.)
And just to come back to Carney’s reference to “Obama’s populist rhetoric” in the Washington Examiner, the key word is “rhetoric” — it hides plenty of kabuki.
Related: In other news from the intersection of Wall Street and DC, “In Bid To Reform Fannie and Freddie, Obama Can’t Shake Crony Clintonistas Who Caused the Mess.”
Huh — you don’t say.
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